Luxury Consumption In China

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The Behavior of Luxury Consumption in China When it comes to the behavior of luxury consumption in China, most of us may think of the extravagant and wasteful behaviors. However, this is not always the case. As China is the one of the biggest luxury-consuming country, this paper is going to discuss the behavior of luxury consumption in China. Current situation Luxury is a kind of goods. A luxury good means an increase in income causes a bigger percent increase in demand. For example, high definition TV’s would be luxury. When income rises, people spend a higher percent of their income on the luxury good. As people’s consumption consciousness become more stronger in China, the demand of luxury is increasing in recent years. The table below…show more content…
Here we will first discuss the increased preference by demanders, and an increase in the population of potential buyers. To discuss the increased preference by demanders in China, it’s necessary for us to first recognize the origin of demand to the luxury. Scarcity One of the most fundamental factors is the scarcity of the luxury. As the saying goes, ‘a thing is valued if it is rare.’ This may be the reason why we Chinese consumers chase the luxury. There is no denying that luxury is something rare. It often contains the certain resources which are scarce, or top technology. If we see from the scarcity principle, that the resources available are limited,which means having more of one good thing usually means having less of another, we can understand that luxuries are really something of scarcity. Besides, some luxuries are produced in a limited quantity. All of this make a feeling of scarcity for the consumers. Increase in the population of potential…show more content…
As the Bain&Company indicated, the rise of the cross-border e-commerce and oversea websites is a significant reason why the Chinese luxury consumption increases. People have more channels to approach the luxury, than we can say that the population of potential buyers increase. 3. Elasticity Price Elasticity of Demand Price Elasticity of Demand is a measure of responsiveness of the quantity demanded to changes in price , and luxury is the good whose elasticity is greater than 1. Generally, the price elasticity of demand of the luxury is affected by two fundamental factors. One is the substitution possibilities and the other is necessity. We can easily understand that the luxuries is not something like rice, oil, salt which are fundamental to our daily life. Hence, the luxuries can be substituted, which means they have many substitutions. As a result, the luxury has a quite large elasticity. If the price of the luxuries(e.g. gold, LV…..) increases, the demand of them will have a sharp decrease. We can know that the percentage of the demand changed(∆Q) is greater than the percentage of the price changed(∆P). Thus, according to the formula, price elasticity = (% Change in Quantity Demanded)/(% Change in Price), we can know that the price elasticity of demand of the luxury is greater than

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